Traditional dealers are merging, new players are trying to enter the game, new forces are directly operating first, and the concept of "new retail" online and offline is gradually infiltrating. As a car dealer, you need to have a long-term awareness to avoid being confused by the traditional model of "the last glory" and missing out on opportunities.
Author 丨shui Shuishui
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In mid-April this year, the top level proposed to encourage bulk consumption of automobiles, home appliances, etc., and all localities must not add new car purchase restriction measures, and have implemented incremental indicators to gradually increase the purchase restriction to support the consumption of new energy vehicles.
Recently, the epidemic in Shanghai has attracted another round of shocks in the upstream and downstream of the automobile industry, and the uncertainty of "suspension of production" has further intensified, and the rise in oil prices has further changed the automobile market.
At the same time, China's auto market is in another round of "renewal cycle", luxury brands and new energy vehicles have become the two directions of "upgrading" for many car owners.
A Tesla store in a mall
As a direct-to-consumer car distribution link, although it is not as eye-catching as the main engine factory, it is showing almost completely different changes in these two directions: traditional dealers are merging, new players are trying to enter the game, new forces are directly operating first, and the concept of online and offline "new retail" is gradually penetrating.
Under the coexistence of "grabbing the beach" and "besieging the city", automobile sales are integrating various models in the "new retail" era, and tradition and innovation coexist.
1
The "Stock Market" of Luxury Car Dealers
According to the relevant research report of "Huge Arithmetic", China's luxury car market maintained an average annual growth rate of about 11% in the three years from 2018 to 2021. In contrast, China's generalized passenger car market showed negative growth in the past three years.
Even so, China's luxury car market is still unsaturated compared to developed countries, and the report predicts that China's luxury car sales share is expected to exceed 20% in 2030.
At the dealer level, luxury car brands represented by Mercedes-Benz, BMW and Audi mainly rely on traditional car dealers for sales. Compared with the prosperity of luxury car products, luxury car dealers reflect a kind of "stock dispute" due to long-term evolution and high-investment distribution model. The merger between two "head" Mercedes-Benz dealers in March this year shows this.
Joste Group's Mercedes-Benz 4S store
On March 16, 2022, Zhongsheng Group officially announced the acquisition of Renfu China for US$1,313.98 million, acquiring 37 stores (26 of which are Mercedes-Benz stores) and networks under construction in 18 cities of Renfu.
Prior to the merger, Zhongsheng Group was already the second largest automobile dealer group in China, and the representative brands were mainly luxury brands and mid-to-high-end joint venture brands, and cooperated with Brands such as Mercedes-Benz, Lexus, Audi, BMW, Jaguar Land Rover, Volvo, Porsche, Toyota, Nissan, Honda and other brands.
Renfu China has a much longer history, its predecessor was founded in Shanghai in 1938, became the exclusive agent of Mercedes-Benz in Hong Kong in the 1950s, and Renfu China opened its first 4S store in mainland China in 1994. Prior to the acquisition, Renfu China was Mercedes-Benz's largest dealer group in South China and The Western Region. After the "strong combination" between Zhongsheng Group and Renfu China, it can account for 18% of Mercedes-Benz's retail system.
Some people believe that after the completion of the merger and acquisition, Zhongsheng Group may surpass the "industry boss" Guanghui Automobile and become the leading enterprise of Chinese auto dealers.
In fact, since the first acquisition was proposed in July 2021, Zhongsheng has also been regarded as a "barbarian". At that time, after the news of Zhongsheng's proposed acquisition of Renfu for US$1.3 billion, some Renfu employees were emotional, and the Huizhou Renfu Mercedes-Benz 4S store was even shut down. Employees pointed out that the gap between the vacation and salary of Zhongsheng Group and Renfu China is large.
The luxury car dealer giant merger and acquisition case reflects the "inner volume" faced by competitors in a rising but high threshold market. This seems to mean that the landscape of Chinese car dealers will change between several "big players". But just two months ago, Hongqi, which is also a luxury car brand, seemed to bring a hint of novelty.
2
Wanda enters the game and joins forces to "grab the beach"
On January 8, 2022, the first experience store (experience center) cooperated by Wanda and Hongqi was officially opened in Beijing Fengke Wanda Plaza. As part of the strategic cooperation between the two, 60 Wanda Hongqi experience stores will be opened one after another. Earlier, Wang Jianlin also led Wanda executives to "transfer" to the red flag car.
Compared with the route of another real estate giant, Evergrande, which directly builds cars, Wanda's attempts in the automotive industry are mainly based on providing services, and it is more about the "taking what you need" of superior resources. This also goes straight to traditional car dealerships.
Hongqi experience store in Beijing Fengke Wanda Plaza
From the background, "selling cars in shopping malls" is not a new thing.
From Tesla leading many new forces to open direct stores in shopping malls, to Huawei directly putting new cars into digital stores, cars have become a common "element" like milk tea, clothing, and movies in many large shopping malls. Wanda Plaza, as a well-known supermarket brand, hopes to make a more positive response to this trend. On November 22, 2021, Wanda Automotive Technology Service Co., Ltd. was officially established.
Hongqi also has the urgency to cooperate with Wanda. Since Xu Liuping transferred from Chang'an to Hongqi, Hongqi has successively launched hot products such as H5, H9 and HS5, and sales have risen rapidly, with sales of 300,000 units in 2021. If Hongqi is regarded as a luxury brand, it has become a "second-tier luxury" champion in addition to BBA.
However, Hongqi is actually weak on the distribution network. Not only has the Hongqi brand been silent for many years, but another car brand under FAW, Pentium, is also in a state of "tepidness". Therefore, Hongqi's dealer network is small. The author inquired about the number of dealers who provided Hongqi H9 and Mercedes-Benz E-class information in Autohome, the former only 14, while the latter had 25.
In this case, jointly with Wanda to carry out a more in-depth practice of "selling cars in the mall" and put products in front of more middle-class potential customers, for Hongqi is not only a strategic plan for brand image improvement, but also a "just need" to maintain brand popularity.
The "joint efforts" between Wanda and Hongqi also reflect the determination of real estate developers to no longer be satisfied with being "landlords" but hope to cut into car distribution. Li Hongpeng, who was appointed as the general manager of Wanda Automotive Technology Service Co., Ltd., has served as a director and senior executive vice president of Beijing Mercedes-Benz Sales Service Co., Ltd., vice president of sales and marketing for Ford Greater China, president of Changan Ford's national sales service organization, and vice president of business of Hyundai Motor Group (China), with rich experience in automobile distribution.
Compared with the dilemma of Evergrande's painstaking efforts to produce a model, Wanda's road seems to be more relaxed.
It can be said that the distribution model of the new forces "new retail", the marketing needs of traditional car companies, and the entry of real estate developers converge here into a new "beach landing".
3
"New retail" revolutionizes the automobile industry, and dealers are arrogant and dilemma
The above two dynamics show us the unique situation of the automobile distribution industry. In the case of the new sales methods are in the ascendant and the traditional distribution model is highly developed, the automobile distribution is in the middle stage of metabolism, and a hundred flowers are blooming. For dealers, there are both strong arrogance and weak dilemmas.
On the strong side, dealers' "mark-ups" are still common. Taking the new models listed this year as an example, the MPV model of the mid-range joint venture brand GAC Toyota has a phenomenon of price increases; the domestic long-wheelbase BMW X5 listed on March 31 has a price increase of 10,000-50,000 yuan, and even blindly ordered tigers may increase prices. In addition, "scarce" models such as Mercedes-Benz G-Class and Toyota Alpha have long had a price increase of hundreds of thousands of yuan. Dealers still have plenty of room to speak on these strong models.
On the other hand, some manufacturers are trying to introduce the concept of "new retail" combining online and offline into automobile sales, which requires the compromise of dealers to a certain extent.
For example, Volvo, a "second-tier luxury" brand with a large discount, has included some station wagons and plug-in hybrid models into the official direct sales channel, and implemented a unified price for each dealer. Admittedly, in this case, the distributor's sacrifice was small, because the new direct selling price had the effect of boosting the brand image and avoiding excessive discounts.
Direct sale station wagon models on Volvo's official website
However, GAC Toyota, which has performed well in the market, has also tried to guide consumers to use the "Fengyunxing" APP to place orders on the hot model of long-term mark-up sales, the Highlander, which to a certain extent squeezed out the dealer's original "mark-up" operation space. When Xena was listed later, GAC Toyota added the clause "the actual price is subject to the dealer" in the APP.
After reaching an agreement with the original Audi dealers, SAIC Audi also adopted a similar direct operation of the "agency system", so that the dealers became service agents, and the manufacturers controlled the leading power of new car sales.
To be sure, regardless of their position in the market, manufacturers want to "test the waters" of the direct sales model and try to reduce the negative role of dealers in the new sales pattern.
This is largely related to the soaring progress of the "new forces". In the process of switching from fuel vehicles to new energy vehicles, new car companies with lighter burdens often directly build their own distribution networks, directly giving products in various regions a unified price and service standard. In addition, this transparent and simple sales model has made consumers who have been suffering from 4S stores for a long time suddenly realize.
Whether this sales model is effective or not, the "new forces" have gained a lot of market. Tesla, which adopts a fully direct-operated model, snatches 50,000-70,000 units of sales from traditional car companies every month.
4
The corner of the dealership
Zhongsheng's acquisition of Renfu not only strengthens the strength of Zhongsheng as a strong dealer group, but also reflects that the automobile distribution industry as a whole has entered a long-tail period from a period of vigorous development. Wanda's entry into automobile sales, the manufacturer's "testing the waters" direct operation model, coupled with the direct impact of new forces, have become the challenges that car dealers need to face.
Based on the cases mentioned above, we can summarize several trends that car dealers show in the "corner".
First, the internal competition of dealers has intensified, and weak dealers may withdraw. This trend includes two aspects, on the one hand, within the industry, dealers have entered a period of competition for the stock of resources; on the other hand, some manufacturers have to withdraw from the Chinese market because of fierce competition, such as Acura, Suzuki, etc., thereby weakening the strength of some dealers.
The store renderings on Acura's official website, the brand has announced that it will officially withdraw from the Chinese market in 2023
Second, the model of direct operation or "quasi-direct operation" is a near-inevitable development direction. Current automakers have seen the huge advantages of the direct-operated model, such as price control and uniform service standards. However, due to the voice of traditional dealers, many automakers have compromised and used new forms such as direct operation of some models and the implementation of the "agency system", but the effect is also limited.
The new model of "direct operation" is not harmful to dealers and beneficial. Most obviously, it reduces the inventory pressure of dealers, allows dealers to "lighten up", and also reduces future risks. A deeper point is that although dealers are independent enterprises, their survival is actually "lips and teeth dependent" with the brand of the agent, and the sales model is becoming an important new dimension for consumers to evaluate the brand.
All in all, the current car dealers are in the corner between the traditional model and the new model, the strong dealers of strong brands are still arrogant, the relatively weak dealers or active or passive transformation, new players who hope to enter the auto industry are also trying to cut in. As a car dealer, you need to have a long-term awareness to avoid being confused by the traditional model of "the last glory" and missing out on opportunities.